Question

Which best explains why people failed to make their promised payments on items during the 1920s?

Answer 1

The best explanation as to why people failed to make their promised payments on items during the 1920s was that "C.They bought on margin", since this means that they payed with money that was borrowed. 

Answer 2

The correct answer is C.

Buying on margin became very popular in the 1920s. It consists on borrowing money to make stock purchases. In fact, before the 1929 crash, the 40% out of the total borrowed dollars were used to buy stocks.

A margin account needs to be opened, with a minimum deposit required, called minimum margin. If this limit requirement is not fulfilld, a margin call is performed so that the investors pumps more money in the account.

When share prices decreased, investors could not return the money paid for the shares with the money obtained from selling them at a lower price, and problems started.